Hungary cbank changes tools to boost banks' purchases of govt papers

BUDAPEST, April 24 Thu Apr 24, 2014 2:49am EDT

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BUDAPEST, April 24 (Reuters) - Hungary's central bank will convert its main two-week instrument into two-week deposits from August 1 to prompt commercial banks to channel substantial funds into forint-denominated government papers, the bank announced on Thursday.

Funds in the bank's two-week bills, its main policy instrument, totalled some 5.3 trillion forints ($23.80 billion) on Thursday.

Central bank director Marton Nagy told a news conference that the change in the instrument should shift some 600 to 1,000 billion forints worth of funds out of the instrument.

The bank said it will also launch three new tools from June 16 to facilitate a shift of funds into government papers.

"What we have done is that we have reduced the appeal of this instrument significantly and encouraged banks ....to invest the funds into other assets," Nagy said. ($1 = 222.71 Hungarian Forints) (Reporting by Krisztina Than and Gergely Szakacs)

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